Hong Kong-based conglomerate CK Hutchison (0001.HK) is facing intense criticism from Beijing over its ports sale to a BlackRock-led (BLK.N) consortium, fuelling speculation as to whether China could take steps to scupper the deal.
China's Hong Kong and Macau Affairs Office has reposted two state media commentaries over the past week depicting the deal, which includes the sale of assets near the Panama Canal, as a betrayal of China and contrary to its national interests.
Here's a look at what potential legal or policy levers Beijing and Hong Kong could deploy against the company.
HOW COULD CHINESE AGENCIES SCRUTINIZE THE DEAL?
While some analysts say China's regulatory reach is limited as none of the ports being sold are in China or Hong Kong, some legal experts say Beijing could still review the transaction.
The State Administrative Market Regulation Authority could have extra-territorial jurisdiction by applying the anti-monopoly law, if a deal outside mainland China has the effect of eliminating or restricting competition in China's domestic market.
Authorities could also use the Measures for Security Review or Foreign Investments, implemented in 2021, to examine foreign direct investments in important fields relating to national security, including infrastructure.
Felix Ng, a partner at law firm Haldanes, said the measures removed the exclusion of acquisitions of interest held by foreign companies, "suggesting that PRC authorities may have the power to review foreign-to-foreign transactions if the target involves PRC-related entities".
While CK Hutchison is registered offshore, it has businesses and a presence in China and Beijing may be able to use this as justification for weighing in, Ng said.
The company did not respond to questions about the potential scrutiny.
COLLUSION WITH FOREIGN FORCES?
Lawyers said Hong Kong lacked regulations requiring government screening of sales of strategic assets, reflecting its traditional role as a free-wheeling entrepot.
That left the government with few options beyond the blunt and broad instrument of the 2020 National Security Law to probe foreign deals involving local firms.
The Beijing-imposed law punishes terrorism, collusion with foreign forces, subversion and secession with possible life imprisonment.
"Given the sensitivities, there would be room for further investigation under the broad sweep of the National Security Law, particularly over collusion or espionage," said Simon Young, a professor at the University of Hong Kong law school.
The offence of collusion would have to involve a person or company intending to disrupt the policies of the Chinese or Hong Kong governments to create serious consequences, Young said.
Likewise, espionage would have to involve a person intending to endanger national security by communicating or providing information useful to an external force.
"I don't know if there is evidence of an intention to endanger national security by entering into the ports agreement," he said.
The Hong Kong government did not respond to a request for comment.
WHAT OTHER SECURITY LAW PROVISIONS MAY BE USED?
While some politicians and analysts also say it's hard to see how the deal could violate security laws, the Secretary for Security can give notice that relevant persons or organisations must not, directly or indirectly, deal with a property that is reasonably suspected to be related to offences endangering national security.
The Secretary for Justice, the Secretary for Security or a police officer may exercise the power to freeze, restrain, confiscate and forfeit property relating to the commission of an offence endangering national security.
Article 29 of the law states that an act "seriously disrupting the formulation and implementation of laws or policies" by the Chinese and Hong Kong governments "which is likely to cause serious consequences" could constitute an offence under collusion with foreign forces.
The law also has an extrajudicial scope, and applies to both residents and non-residents.
Hong Kong authorities used the security legislation and the implementation rules in 2021 to freeze the assets of Next Digital, invoking powers to force the liquidation of the listed company of jailed pro-democracy tycoon Jimmy Lai.
